What is the Chinese Currency? Definition & Strategies
In this article, learn what the Chinese currency is, the differences between the Chinese Yuan (CNY) and Renminbi (RMB), what influences its price direction and how to trade the Chinese currency through state-of-the-art trading platforms.
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What is the Chinese Currency
What is the Chinese Currency? The Chinese currency is called Renminbi but is often referred to as the Chinese Yuan. So if both of these names refer to the same thing, what is the difference between the Yuan and Renminbi?
Renminbi means "people's currency" in Chinese - it is the official currency of China and is one of the oldest currencies in the world. The Yuan, on the other hand, is the unit of account of China's economic and financial system.
The Chinese currency symbol is sometimes denoted as "RMB", though the symbol for the Chinese currency is "Ұ". This is different from the Japanese Yen symbol "¥", which has two bars crossing the Y. In Forex, the symbol of the Chinese yuan is CNY, with CN referring to the People's Republic of China, and Y to the Yuan.
What is the difference between CNY and CNH Chinese currency? The Chinese RMB currency is traded onshore and offshore, with capital controls preventing the Chinese currency from going offshore. With this in mind, the Chinese currency has two different exchange rates depending on the place of negotiation:
- If the Renminbi is listed onshore, it has the abbreviation "CNY".
- If the Renminbi is listed offshore, it has the abbreviation "CNH".
The CNY Yuan and the CNH Yuan, therefore, both refer to the same (and only) Chinese currency, with the abbreviation changing depending on whether the negotiation is done onshore or offshore.
In addition, the Renminbi on the stock market is distinguished according to whether it is CNY onshore or CNH offshore. Indeed, they represent two distinct markets.
- The CNY exchange rate against the dollar has the characteristic of being fixed by the People's Bank of China, with the CNY market being animated by exporters who buy RMB against foreign currencies.
- The CNH exchange rate is determined by the law of supply and demand of the CNH. This market has a shorter history, but has been growing very rapidly since its creation in 2010. The CNH market is generally animated by actors who have a goal other than commercial and personal, such as investment, speculation or hedging, where these activities are very limited on the CNY.
Difference Between CNY and CNH Chinese Currency
Although they are listed on two separate markets, the CNY Yuan and the CNH Yuan both represent the price of the Renminbi.
It is therefore common to find a strong correlation between CNY and CNH. Indeed, the curves of the USD/CNY and USD/CNH graphs follow each other very closely most of the time.
USD/CNH Daily Chart
There are various ways to trade the Chinese Offshore Renminbi if you are located outside of China. The Chicago Mercantile Exchange have a futures contract to trade USD/CNH. Admirals also provide access to trade the USD/CNH currency pair via CFDs.
This means you can trade USD/CNH both long and short, potentially profiting from rising and falling markets. You can also trade on leverage from the Admirals Trade.MT5 account, with a maximum 1:20 for retail traders.
How to Trade the Chinese Currency
You can trade the USD/CNH currency pair with Admirals from the following account types:
- Trade.MT5 and Trade.MT4
- Zero commission
- Zero.MT5 and Zero.MT4 trading accounts
- 3 USD per lot, per side
Learn more about the different fees, spreads and trading conditions on the USD/CNH Contract Specification page. You can start trading USD/CNH in just four steps.
- Open an account with Admirals.
- Click on Trade on one of your live or demo trading accounts to open the web platform.
- Search for your symbol at the top of the search window.
- Click Create New Order in the bottom window to open a trading ticket to input your trade size, stop loss and take profit level.
How Does the Chinese Currency Work
While the Yuan currency allows trading, it should be noted that it presents volatility and risks that are higher than the average, in particular, because of the interventionism of the People's Bank of China).
The People's Bank of China retains control of capital and often intervenes in the markets to influence the prices of the USD/CNH. These interventions make trading the yuan on Forex more risky, but the Renminbi therefore also presents better opportunities for traders looking for volatility.
The Central Bank of China is showing signs of wanting to stabilise its currency and correct its undervaluation, to allow it to take a more important place in world trade. In this regard, the previous opening measures taken were rewarded with the integration of the renminbi into the basket of IMF SDRs (Special Drawing Rights of the International Monetary Fund) in 2016.
Factors influencing USD/CNH
If you are considering trading the USD/CNH, you might be wondering which factors influence the price action of the Chinese currency.
We can note two main factors that impact the Yuan on Forex:
- Government and People's Bank of China interventions: When it comes to the Chinese currency, the role of the central bank is the main factor that impacts the price of the Yuan. The People's Bank of China has indeed often intervened to devalue its currency and continues to regulate it in a much more direct and vigorous way than the ECB and the Fed.
- The health of the Chinese economy: The state of health of the Chinese economy also plays an important role in the evolution of the Yuan. The slowdown or acceleration of the Chinese economy influences the price of the Renminbi.
The Yuan also displays short-term fluctuations in certain publications of indicators available on the economic calendar, with the most important being GDP growth, the inflation rate, industrial production and PMI. Learn more about economic indicators in Forex.
The Chinese currency can be an interesting choice for many Forex traders, especially considering the recent volatility in the USD/CNH currency pair due to the US-China trade war. However, the Yuan is a long way from being one of the Forex market's most popular currencies, largely due to the influence the People's Bank of China has on its price, creating a lot of uncertain volatility.
A good way to get started is to use a demo trading account first. This allows you to buy and sell in a virtual environment to practice your skills and trading strategies until you are ready to go live.
- Learn to Trade: A Step-by-Step Guide
- Trading the Chinese Financial Markets
- How to Invest in China
- How to Invest in the Chinese Stock Market
- Best China ETFs
- Best Chinese Stocks
FAQs on the Chinese Currency
What is the Chinese Currency?
The Chinese currency is called Renminbi but is often referred to as the Chinese Yuan, or CNY.
Why does China have 2 currencies?
The Chinese RMB currency is traded onshore and offshore, with capital controls preventing the Chinese currency from going offshore. If the Renminbi is listed onshore, it has the abbreviation CNY. If the Renminbi is listed offshore, it has the abbreviation CNH.
Admirals is a multi-award winning, globally regulated Forex and CFD broker, offering trading on over 8,000 financial instruments via the world's most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.